KUALA LUMPUR, Sept 8: Malaysia on Saturday said interest rates and fuel prices will remain at current levels as the country targets robust growth of 6.5 per cent next year.

Nor Mohamed Yakcop, second finance minister, told reporters that Malaysia needed a buoyant domestic economy to stave off global uncertainties arising from the US sub prime mortgage sector.

“Our earlier prediction was 6.5 per cent growth for 2008. Due to the global uncertainties, we now forecast growth between six per cent to 6.5 per cent,” he said.

“We think we will grow at six per cent if not 6.5 per cent.” The government cut corporate tax rates and property stamp duty in the 2008 budget unveiled on Friday. Nor Mohamad said that the key interest rate at 3.50 per cent was “suitable for growth.” The rate will continue to be accommodative. It will not restrain growth,” he said when asked if the government will continue to maintain interest rates at current levels to bolster domestic driven growth.

He also said that the government’s fuel subsidy programme will cost the government some 25 billion ringgit ($7bn) next year.

Asked if the government had plans to raise fuel prices, he said: “At this point of time, there is no intention to increase fuel prices next year.” The subsidy is an important issue. We provide it because we want to take care of the poor,” he added.

Malaysia imposed its highest-ever fuel price rises in February last year, citing rising oil prices, and pledged to use the cost savings to boost the country’s mediocre transport system.

Following the unpopular sharp hike, political and civil groups organised rare demonstrations in the streets of the capital Kuala Lumpur to condemn the decision since Malaysia is a net exporter of oil.

Prime Minister Abdullah Ahmad Badawi, who is expected to call elections early next year, handed out some sweeteners to woo voters Friday, but an expected income tax cut failed to materialise.

Instead, he opted to cut the corporate tax rate another one percentage point to 25 per cent from 2009, adding to previously announced reductions which have lowered it from 28 per cent.

Nor Mohamad defended the government’s decision not to cut income tax, saying only a small number of Malaysians pay taxes.

“Of the 12 million (working) people, hardly a million pay taxes,” he said.—AFP